Human Events

Obama’s Class Warfare Will Turn on the Voters He Claims to Help

To the denizens of the far left’s fever swamps, the rich are the enemy. Their financial achievements always come at the expense of the “struggling” middle class.

During normal times, it is safe to ignore the sort of “soak the rich” proposals that inevitably emerge from those rants. Take the proposal put forth by former Secretary of Labor Robert Reich. Writing for Salon.com last year, Reich ruminated on the ideal tax system: “What’s fair? I’d say a 50% marginal tax rate on the very rich, meaning those earning over $500,000 per year. I’d also suggest an annual wealth tax of one-half of 1% on the net worth of people holding more than $5 million in total assets.… You say the rich will leave the country rather than face a marginal tax of 50%? Let them, and take away their citizenship.”

Sky-High Tax Rates

“If the Democrats stand for anything,” Reich continued, “it’s a fair allocation of the responsibility for paying the costs of maintaining this nation.”

But these are not normal times. While Sen. Barack Obama (D.-Ill.) and Sen. Hillary Clinton (D.-N.Y.) are not as forthright as Reich on how much of the tax burden they want to “allocate” to the wealthiest Americans, a careful reading of their agendas suggests that sky-high marginal tax rates and even draconian “wealth taxes” are in store for us.

Obama, for example, wants to jack the top tax rate on individual income back up to 40%, but only for the wealthiest 1% of taxpayers (those earning more than $364,000). He also proposes to dramatically increase the amount of earnings subject to the Social Security payroll tax to incomes well above the current cap of approximately $100,000.

If you’re keeping score, the top tax rate envisioned by Sen. Obama could reach as high as 52%.

The Pay-go Dead End

But, Obama also subscribes to the “pay-as-you-go” approach to budgeting. Under pay-go, legislation that tinkers with the tax code or entitlement programs must be deficit neutral. This means that tax cuts or increases in spending must be accompanied by “offsets” (either a tax increase, cuts to entitlement programs or some combination). Because no self-respecting liberal would propose cuts to Medicare, Social Security or any other federal entitlement, pay-go in the hands of liberals can mean only tax hikes.

Obama is relentless in his desire to transform the tax code into the locomotive for liberal social engineering. In addition to tens of billions of dollars in new spending on pork and “green” environmental projects, Obama proposes tax credits to offset the burden of Social Security payroll taxes, subsidize home mortgages, encourage retirement savings, pay for college education and reward low-wage workers who are “responsibly supporting their children on child support.”Unrealistic Goals

These credits, moreover, are available only to middle- and lower-income workers, and most are “refundable.” This means recipients receive government checks in the full amount of the credit, whether they pay taxes or not.

The goals, of course, are laudable. But, given Obama’s commitment to pay-go, are they realistic?

Let’s focus on Obama’s economic plan. Its $197 billion annual cost dwarfs the entire federal tax burden of the 99 million taxpayers earning $62,000 or less. To the extent that the pay-go budget rules require Obama to offset this cost, move over Huey Long and get ready for the largest “soak the rich” redistribution scheme we’ve seen in American history!

Is there any limit to how much taxation our wealthiest taxpayers can bear? After all, while the wealthiest 5% of Americans earn 35% of all income, they already pay 60% of the federal income taxes. Is it politically feasible to add another $100 billion or so to their annual tax tab?

The recent travails of Maryland Democratic Gov. Martin O’Malley may be instructive in this regard. Since the enactment of a $1.3 billion tax increase that boosted state corporate, income and sales taxes, O’Malley has seen his approval rating plummet to 35%, according to a recent poll by the Baltimore Sun. “High taxes,” the Sun reported, “have skyrocketed to the top of voter concerns.” Only a third of Marylanders approve of the tax hikes, while more than half say they are unfair. The irony is that O’Malley consciously designed his tax increases to shield middle- and low-income workers from the pain.

Class warfare, it seems, is a Frankenstein’s monster that can turn on its practitioners. The bottom line: The pay-go fine print in Obama’s plan renders all his sweet-sounding tax and spending proposals meaningless.

Mr. Franc, who has held a number of positions on Capitol Hill, is vice president of Government Relations at The Heritage Foundation. To send a question or comment to Mike Franc, email him at: MichaelFranc@heritage.org